Keynote: National Hydropower Association Annual Conference

Washington, D.C.

April 16, 2012

Good afternoon, everyone. It's great to be here. Congratulations on a very significant and what looks like a hugely successful conference. And I think it's, both David and Linda said, your presence here, your collective presence here is a demonstration of the importance of hydropower generation in this country.

It's particularly gratifying for me to be here, because we have some really significant new, some really great stories to tell. So, I appreciate the opportunity. I appreciate being invited. President Obama has made it clear that our nation needs an "all of the above" energy strategy, one that pursues both energy production and energy conservation. And we need to increase our access to energy supplies here at home, so that we can reduce our dependence on foreign energy.

And David alluded to this, that the President has put forth an initiative to generate 80 percent of our energy from clean energy sources by the year 2035, and that's a very ambitious agenda. We are going to have to work hard to get there. And you all are part of that process, because clean energy obviously includes renewable energy and that clearly includes hydropower.

I think, when we talk about renewable energy, it's wind and solar that get a lot of the attention. They're kind of like the pretty younger sisters. But hydropower is the foundation for our renewable energy portfolio.

So, every time that there is a statement from the White House on renewable energy, we try to insure that hydropower is mentioned, so that the beautiful older sister is part of the statement as well. And at Interior, we have been stepping up our overall clean energy projects. We're implementing the most sweeping reforms of offshore oil and gas development in our nation's history. We're permitting the world's largest solar and wind facility.

But we are also very cognizant that hydropower is an important component of our renewable portfolio. It's ideal for backing up those intermittent sources of energy like wind and solar and it's the best energy bounty we have.

So, in addition to capitalizing on the value of hydro as a cleaner, safer, and more secure energy source, we're also investing in cutting edge technology and advancing the development of new technology to take better advantage of the hydropower resource that we have. We're supporting infrastructure projects that are essential to American energy reliability and that provide jobs. And as that supply chain map that Linda shows points out, there's a tremendous amount of support for the hydropower industry throughout the country. Hydropower supports jobs and economies all across the nation, and we're very aware of that. That's an important part of our message.

As David said, the Bureau of Reclamation is the second largest producer of hydroelectric power in our country. We have 58 power plants and provide about, almost 15,000 megawatts of capacity. We generate about a billion dollars of revenue for the Treasury from our hydropower generation. And that produces about enough electricity to serve 3.5 million homes.

Together with our partners, who also operate hydropower facilities on Reclamation plants, or Reclamation facility, we have a total of 135 generating plants, and produce almost 16,000 megawatts of power. And we are always looking for opportunities to do more.

So, I'm going to talk about some of the things that we've done in the past year or two to facilitate additional hydropower design. So, when I went here and had the opportunity to talk to this conference last year, we had just published a hydropower assessment report that took a look at all of our dams and reservoirs, and assessed the opportunity to add hydropower generation to those existing facilities.

We looked at 190 sites across the West. And the report that was put out a year ago identified 70 specific facilities where we thought an additional 225 megawatts of power could be generated. And the cost benefit ratio was analyzed and published in that report.

So, that report told us that we could generate about 1.2 million megawatt hours of electricity if we average generation to all of the sites that have a good cost benefit ratio. And that would create enough clean energy to annually power more than 85,000 households.

So, after that, we moved on to phase two. And just last Thursday we published our follow up report that is an assessment of the power generation potential on older Reclamation canals and conduits. Bureau of Reclamation manages 47,000 miles of canals and conduits and laterals and drains and pipelines and tunnels. And we looked at all of them.

And the report that was published last week identifying 370 sites that we think had the potential to generate another 365,000 megawatt hours of electricity. So, we're looking at almost 1.6 million megawatt hours, if you take all of that potential together.

The sites that we included in this newest assessment report on canals and conduits had [inaudible 6:40] we do the screening analysis. And so, we looked at sites that have a drop of more than five feet and that operate for at least four months of the year. Because you have to recognize that a lot of these are irrigation supply facilities, and so they don't operate continuously.

But we looked at our facilities that we thought had generation potential of at least 50 kilowatts. That supplemental assessment report indicates that there's additional potential for hydropower generation from canals and conduits in 13 of the Western states, with the highest concentration of additional capacity in Colorado and Oregon and Wyoming.

When we look at your industry estimate of what the economic activity is that's created by hydropower development, we think that if we did those additions that we'd be looking at generation of around 1,200 jobs. And these include jobs in the private sector and the government, construction, manufacturing, engineering, O&M, administration. And they're all across the country, much like the supply chain map shows.

So we know that because of that work on the supply chain network that we're looking at generating jobs and economic activity in communities across the country.

Both of those assessment reports, the one that came out last week and the one that came out a year ago are part of our implementation of the memorandum of understanding that our secretary, Secretary Ken Salazar signed two years ago with the Secretary of Energy and the Assistant Secretary for the Army.

That MOU was designed to help meet the nation's needs for clean and reliable and affordable energy by building a long term working relationship among those three departments and focusing the activities of those departments on hydro development and syncing up our collective efforts.

I'm pleased to be able to tell you that we are putting out today a two year progress report on that hydropower MOU. It's being made public at this conference. There are copies of the report outside at the Department of Energy booth. And that report describes all of the efforts that have been undertaken in the last two years under the umbrella of the MOU.

We set a very, very aggressive agenda when we put that MOU together. There was an implementation plan that was part of the memorandum of understanding. It was aggressive, I think, largely because everything that we do at the Department of the Interior under Ken Salazar's leadership is aggressive. And we have not only met that agenda, I think we've exceeded it. And I hope you'll be impressed when you read that report.

I'm going to focus on some of the highlights of our two year effort that has taken place in the Bureau of Reclamation and Jose Zayas, the Department of Energy is going to tell you more about what's being done at DOE.

I've already mentioned the resource assessments, and those were a pretty significant undertaking, and intended to provide basic information to private developers who are interested in developing generation capacity at several facilities. So it's intended to be kind of a conscience level assessment on which can be built a more detailed investigation for potential developers.

In addition to that, over the past couple of years, Reclamation has actually added over 100 megawatts of power to the grid by optimizing its own facilities, just to get more energy out of the same amount of water. That increase includes turbine replacements at our Grand Coulee and Glen Canyon dams, and we have a lot more potential.

That's kind of the good news and the bad news. The bad news is that over half of Reclamation turbines are more than 50 years old. The good news is, that gives us a lot of potential to optimize our capacity and get more energy out of the same amount of water.

Also, over the last three years, another 30 megawatts of power has been authorized at Reclamation facilities for private development, either through a [inaudible 11:45] license or through Reclamation's lease of power privilege process. And we've got more projects in the pipeline, and we are continuing to move those projects forward as efficiently as we possibly can.

And speaking of release of power privilege process, earlier this month, Reclamation released a revised version of its directive and standards on the lease of power privilege process. And that's now open for another round of public comments. We did it once, we got comments back [inaudible 12:21]. We've now put it out again, and ask for your comments. So, we are looking for the input of people in this room. And we need you to let us know what works and what doesn't work about that process. Another area that we've been working on and will continue to work on is facilitating new technology development. Interior, the Department of Energy and the Corps of Engineers have partnered to find several different research projects that are focused on developing and demonstrating new hydropower generation technology.

We're also focused on research about reducing the environmental impact of hydropower generation. Last year the Department of Energy and Interior announced the award of over $60 million to fund research and demonstration projects. And there were a couple of grants for technology testing and demonstration at reclamation sites.

So, we're very excited to see the results of this research, and we're working together with the people in this room to figure out how we can integrate this new technology into all of our projects. A few weeks ago, we tested a new hydrokinetic turbine design in a canal, Reclamation's Roza Canal in Washington State. We've got more test projects planned to begin in the next two months. And we've got two pilot projects going on, one in Colorado, one in Oregon.

The one in Colorado involves the development of hydro in a canal. The canal is part of Reclamation's Uncompahgre Project in Southwestern Colorado. We released, let's see, in February, an environmental assessment for the permits that's going to be required. And that environmental assessment is the step that we have to take before we can issue that basic power privilege.

So, the energy that is intended to be generated by this Colorado project is going to provide the farmers that use the water with a source of revenue that can defray some of their own energy expenses.

It's also going to help the local utility meet its renewable portfolio standards. They've got legislatively mandated portfolio standard in the state that they have to meet. So, this will help with that. And it really is a great example of how development of hydropower from existing conduits can be done efficiently.

Another thing we're working on, together with both the Department of Energy and the Corps is a report that examines the predicted effect of climate change on water and therefore, on hydropower generation at federal facilities.

That report is intended to build off of and to supplement two reports that have already been done by interior agencies, all pursuant to the Secure Water Act that was passed in 2009.

So, this report takes a look at the watering tax that were predicted in previous secure water act reports, like, drills down onto the impact of the predicted flow changes on hydropower potential. That report is imminent. It should be released to Congress, because these were all our reports to Congress, really, within the next few weeks, very soon.

We've also done, pursuant to the NLU, a kind of feasibility analysis for a particular watershed. We took a hard look at the Deschutes basin in Oregon and tried to develop a framework that we can use to focus on other particular watersheds. We call it a basin scale opportunity assessment. And the idea is to look at opportunities within a particular basin to increase hydropower generation, but at the same time, to improve the environment so that we can come up with a win/win framework.

We think that the Deschutes Basin scale assessment has really been a success. We're now in the second year of that pilot project. We've held a public workshop in Bend, Oregon, where we got lots of input and lots of ideas. We've had a tremendous level of interest and support from the local communities and stakeholders.

We've put out an interim report that describes our progress thus far. And as our final action item, we're hoping to finalize an action plan that describes the options for additional generation and also identifies other basins that are suitable for this same kind of analysis.

Another issue we're working on is pumped storage. The three MOU parties have put together an initiative to examine opportunities for pumped storage development. And Reclamation in particular is investigating the feasibility of converting some of its conventional hydropower facilities to pumped storage.

One other issue that we hear about a lot is jurisdictional issues, confusing about whether a particular facility needs a FERC license or whether it's subject to a lease of power privilege. So, Reclamation and FERC continue to work to improve our coordination and to make the determination about whether it's FERC license or a lease of power privilege, to make that determination more transparent and easier.

One final area that I want to mention that's not specifically under the umbrella of the MOU, but that we're working on across the federal government, is with respect to hydropower generation in Alaska. This administration has a priority on energy development in Alaska, and particularly renewable energy.

So, we've initiated a very targeted effort to improve coordination among the federal agencies working on hydropower issues and to advance sustainable hydropower development. There's huge hydro potential in Alaska, as I'm sure all of you know. And it fits in very well with the goals of the State of Alaska to reduce dependence on diesel generated electricity and to provide better generation sources to the remote villages.

So, we're trying to remove and reduce some of the barriers to hydropower development. And particularly because the FERC licensing process is always a challenge for small hydro developers, and particularly for inexperienced small hydro developers.

This summer, we're going to host on [inaudible 19:50] a workshop just on the small hydropower licensing process. And we're going to do it at your conference in Sitka, in August. So, thank you for making that opportunity available for us.

And we've had interest already from people in Alaska who know that they have potential, particularly in the remote communities for additional hydro development, but are daunted by the process. So we're trying to provide the tools to deal with that better.

We're also working in connection with a related federal interagency group that focuses on the native village and rural communities in Alaska, to make sure that we sync up our efforts.

And we're keeping track of the proposed Susitna-Watana project in Alaska, so that we can make sure that the federal agency comments on the licensing process are coordinated and simultaneous, so that we don't slow down the process.

So, as Linda said, I think this is a really good time to be in the hydro business. And I think for many years, I don't have to tell you this, you have been somewhat ignored, possibly misunderstood. But now you've got very intense interest from Congress in hydropower issues.

We've seen bipartisan bills like the Hydropower Improvement Act and the Marine and Hydrokinetic Energy Promotion Act. They've been recorded at committee; they're waiting for action in the Senate. Whether that happens or not, I don't know. But it's a sign of the interest in this issue.

And those bills would help hydropower projects move forward. They create grant programs, they develop pilot projects. And I think, consistently, with the all of the above energy strategy, they would support these ongoing federal efforts like the kind that I've spoken about that are aimed at increasing hydropower potential.

There have been several other bills that have been introduced that highlight the potential for small hydro development. Some of them would extend for existing exemption process, for conduit and small hydropower projects located on federal lands. And we strongly support those concepts.

FERC existing process can allow projects to come online within as little as two months, and maintaining for compliance with environmental laws, like National Environmental Policy Act, NEPA.

We do not support proposals to waive or eliminate NEPA, for the FERC license process. We think it's possibly not widely recognized that Reclamation can employ a categorical exclusion in appropriate cases for small construction projects on its facilities. It may not be universally recognized that there are exemptions from FERC's normal licensing procedures for our presence developed on non-federal ground.

We need to show that hydropower development can take place in a sustainable way and can be environmentally friendly. And we think the waiver or elimination of the need for a [inaudible 23:10] sends exactly the message that our partners have supported.

I think you can see it's moving very fast through a big list of projects. There are a lot more of our activities and projects that are detailed in that [inaudible 23:31] report that's being released today. We [inaudible 23:36] out over the past two years to advance sustainable hydro development. I really would like to recognize the tremendous effort of [inaudible 23:48] and [inaudible 23:49] . Where are you guys? Somewhere? [laughs] Still there. Because they have made [inaudible 24:01] effort to advance the progress of the MOU, which, as I said, set a very aggressive agenda.

I also would like to congratulate [inaudible 24:11] for being selected recently as Reclamation senior advisor for hydropower, and in that position, Harry is going to be our liaison on all intergovernmental initiatives associated with hydropower delivery. He will coordinate our partnership with industry and with the Army Corps of Engineers [inaudible 24:30] power administration, TDA, and anybody else who comes along.

I also want to recognize the very, very significant and excellent effort from Mike [inaudible 24:45] , who has coordinated the efforts of my office on hydropower development, and has been very involved in the [inaudible 24:55] of the two-year progress report and in the Canal Conduit Assessment separate project.

Reclamation has an information booth office set up outside, and Harry and others from Reclamation Power Resources office are going to do a workshop on Wednesday afternoon specifically to talk about the Lease to Power Privilege process.

There'll be a policy discussion. There are few panels that are extremely interested in development of hydro generation capacity on Reclamation facilities. That workshop will, I think, help a lot. So I think you can see from this discussion that the Department of the Interior recognizes the importance of hydropower. We're trying to improve our processes for project development and our existing facilities. We're working to push the envelope on technology so that we can get more bang for the buck.

We believe that hydropower can be developed in a sustainable way. When the MOU was signed two years ago, the Secretary of Energy, Steven Chu, said, "I support hydropower, because I'm an environmentalist," and we believe that, too.

We intend to lead the way on sustainable development. We intend to figure out what our best opportunities are to work with the private sector to facilitate hydro generation on our facility and to encourage and incentivize the development of new technology. I think that NHA and our view as individual members are critical partners with us in that effort.